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Road to productivity: Effects of roads on total factor productivity in Indian manufacturing

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  • Kailthya, Subham
  • Kambhampati, Uma
Abstract
A denser road network lowers transport costs and stimulates manufacturing total factor productivity (TFP). The placement of roads, however, is likely to be non-random. For identification, we exploit cross-state variation in the strength of centre-state partisan alignment that asymmetrically affects road building in aligned states. Using panel data on manufacturing establishments in India from 1998 to 2012, we find that, a 1% increase in road density raises value-added TFP by about 0.25%, on average. A closer examination reveals that the effect varies by plant characteristics and road type. Younger establishments are more likely to gain from a denser road network with highways playing a prominent role. The results are robust to imperfections in the instrument and to other sensitivity checks.

Suggested Citation

  • Kailthya, Subham & Kambhampati, Uma, 2022. "Road to productivity: Effects of roads on total factor productivity in Indian manufacturing," Journal of Comparative Economics, Elsevier, vol. 50(1), pages 174-195.
    • Handle: RePEc:eee:jcecon:v:50:y:2022:i:1:p:174-195
    DOI: 10.1016/j.jce.2021.08.001
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